Real Estate Equity Crowdfunding: How Did It All Begin?

While investing in real estate was previously limited to those who have more than enough money to spare, it is now considered as a smart investment choice even for those who are in the mid-income range.

Through the power of modern technology, real estate investment companies are now pooling resources from small investors to raise capital for new ventures.

As a result, more and more people can now invest in the real estate market and enjoy great returns on their investment without bearing a significant amount of risk in the process.

Tracing the Roots

Real estate equity crowdfunding or the use of online platforms to sell corporate equity stakes was legalized under the Jumpstart Our Business Startups (JOBS) Act of 2012. Under the new law, accredited investors (those with a net worth of $1 million or an annual income of at least $200,000) were allowed direct access to the real estate market through crowdfunding and peer-to-peer lending.

So, what about the rest of us who would also want to take advantage of the flourishing real estate market? While lower income groups still don’t have direct access to this opportunity, several firms have started to use online crowdfunding platforms such as The Carlton Group, Prodigy Network, Realty Network, Fundrise and iFunding to raise seed money for their projects.

Weighing the Pros and Cons:

The Pros

Small investors get access to the real estate market and choose which projects they would like to invest on.

Multiple choices and options are available for the investor.

Some projects provide high ROI and deliver returns within a year.

The Cons

Investors carry the same amount of risk as the developer.

There is a lack of liquidity since investors do not have easy selling access to a secondary market.

Small investors who want to enter the real estate market can now fulfill their dreams through equity crowdfunding. Are you ready to give it a try? Think about it.